It has been four years in the making but Zopa has finally received its full banking licence, now it just needs to crack the savings and credit card market as the latest entrant.
The world’s oldest peer-to-peer lender first announced plans to launch a bank in November 2016 and received a licence with restrictions in December 2018. It raised £140m in December 2019 to enable it to fulfil its regulatory capital requirements and go on to get the full licence.
This money was provided by IAG Silverstripe Partners, an investment arm of IAG Capital.
Zopa’s new bank is set to offer a fixed-term savings account which is protected by the Financial Services Compensation Scheme (FSCS). The Zopa Fixed Term Savings Account will offer a “competitive” rate over one to five years, and can be opened in as little as seven minutes.
Zopa will also be launching an “innovative” credit card later this year, which is “designed to put customers in control of their borrowing.”
The Augmentum Fintech investment trust, which owns a 6.2 per cent share of Zopa, welcomed the development, as did John Cronin, analyst at brokerage Goodbody.
“The capital challenges were addressed, IAG Silverstripe Partners clearly see the potential in the business, and plans are already afoot to roll out savings and lending product,” he said.
“Despite the challenges new lenders have had in breaking new ground, Zopa has a niche novel proposition.
“However, it is, of course, very early days.”
New entrants in the savings market in recent years such as Marcus Bank have launched with best buy rates to tempt savers before reducing their offerings.
Andrew Hagger, founder of personal finance website Moneycomms, said Zopa will have to follow this approach.
“It will need to be a best buy if Zopa wants to attract big money,” he said.
“There’s a big void in the retail savings market left by Marcus which has recently pulled out for new savers so there’s an opportunity for Zopa to step in if it is prepared to be competitive enough.”
The rates won’t be hard for Zopa to beat in the savings market.
The top fixed savings rate is currently 1.7 per cent from the Bank of London and the Middle East, but that is for a seven-year bond, according to Moneyfacts.
Alternatively, Shawbrook Bank has a fixed rate of 1.25 per cent for five years.
There may be a downside for the wider P2P sector though, Hagger said.
He suggested that P2P’s threat to mainstream banks may now be waning with Zopa focusing on savings and credit cards and RateSetter in talks with Metro Bank.
However, Zopa has said it remains committed to P2P lending and plenty has happened since it first announced plans to launch a bank.
P2P lending has already gone more mainstream since firms became fully regulated and has its own burgeoning tax wrapper so many will be hoping that Zopa spawning its own bank will be more of a help than a hindrance.